TIF Now, Ask Questions Later | Essay | Chicago Reader

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TIF Now, Ask Questions Later

Good intentions aren't enough to justify the city's latest slush fund.

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To hear First Ward alderman Manny Flores tell it, the city is handing him the tool he needs to stem the tide of gentrification in his northwest-side ward: the Addison South tax increment financing district. "This is big," says Flores. "We have to be bold. We have to be visionary. I believe our community can do some exciting stuff."

I'd like to be as optimistic. But I suspect yet another well-intentioned alderman and community group have been taken in by the city's TIF scam.

The proposed TIF, which was approved by the supervisory Community Development Commission on February 13 and will go before the City Council in May, takes in parts of Avondale and Logan Square, running roughly between the Kennedy Expressway and the Chicago River, bounded by School Street on the north and Diversey on the south. With the alderman on board and the city's planning department pressing the deal, it will almost certainly be approved.

But the Addison South TIF comes at a cost. Like all TIFs, it raises property taxes, no matter what the city insists to the contrary. A TIF freezes the amount of property taxes the schools, the parks, the county, and other taxing bodies receive for a term of 23 years. So if a property in the Addison South TIF generates $100 in property taxes for the schools and parks when the TIF is created, that's all the schools and parks will be getting until 2030. Any additional revenues generated by new development or rising property values are diverted into the TIF. To make up for the money they're losing, the other bodies wind up raising tax rates or cutting services.

The city expects to take in about $125 million from the Addison South TIF over the next 23 years. At the February 13 meeting the CDC also approved the Stevenson-Brighton TIF, on the city's southwest side, which is expected to raise $150 million. And over the summer the City Council created the LaSalle Central TIF downtown, which will raise about $550 million during its lifetime. In other words, these three TIFs alone will raid taxes by an estimated $825 million over the next few decades.

And what do the taxpayers get out of it? In the case of Addison South, Flores and his allies, most notably the Logan Square Neighborhood Association, say they plan to use TIF money to encourage local industries and develop low-income housing to replace the Chicago Housing Authority's Lathrop Homes.

Flores says he became aware of the need to retain industrial jobs when the Frederick Cooper Company lamp factory, at 2545 W. Diversey, went out of business in 2005 and 125 workers were laid off. A developer proposed demolishing the 225,000-square-foot building and putting up 150 upscale condos on the site. But in response to community outcry, Flores rejected the developer's request for a zoning change.

The developer then sold the property to David and Douglas Baum, cofounders of the Baum Realty Group, who have an ambitious project they call the Green Exchange in mind for the space. The plan is to subdivide the factory into about 100 showrooms, which will be rented to companies producing environmentally friendly products. Think of it, says Flores, as "a green-friendly Merchandise Mart."

David Baum says he won't need TIF assistance to build the Green Exchange. A similar (though much smaller) enterprise--the Jean Vollum Natural Capital Center in Portland, Oregon--is flourishing on its own. But Flores says he wants to use TIF subsidies to help companies move to the Green Exchange and others wanting to to move or expand operations in the area.

In addition, Flores and the Logan Square Neighborhood Association want to use TIF money to build low-income housing for residents displaced from the Lathrop Homes. In 2005 the CHA announced it would eventually replace Lathrop with market-rate and affordable housing. There's been little movement on this so far--the housing project is being phased out through attrition--but residents want to make sure they're not overlooked in future plans. "This TIF will allow us to partner with Lathrop residents on a much more creative, appropriate plan that will benefit the whole area rather than a cookie-cutter plan with an emphasis on marketing luxury condos," the Logan Square group's executive director, John McDermott Jr., said at the CDC hearing.

These are noble goals, but there's no guarantee they will be met. The charter for the proposed TIF district doesn't include any specific proposals--as it stands, the city could spend the money any way it wants, a standing problem with every TIF. Moreover, Lathrop Homes isn't even within the boundaries of the Addison South TIF. Flores notes that TIF rules allow the city to shift funds from one district to another, but this would require the city to create yet another TIF.

Members of the Logan Square Neighborhood Association point out that Daley generally allows local aldermen a hand in how TIF funds are spent. True, but only to a point, as 47th Ward alderman Eugene Schulter discovered when he learned that TIF funds supposedly earmarked for his ward were going to be spent in other areas. And even if Daley were to give Flores complete control over the Addison South TIF, he's not likely to be alderman over the course of its life. (An ambitious politician, Flores is already eager to run for higher office.) His successor may not be devoted to the same goals.

Better, of course, to put a hold on the creation of new TIFs, as some Logan Square activists concede. If city officials want to subsidize the Green Exchange or Lathrop Homes, they should pay for these projects directly out of the budget. On top of all their other flaws, TIFs are an inefficient way to stimulate economic development. They generally raise more money than any one alderman can reasonably expect to use--Flores acknowledges that he's unlikely to spend most of the $128 million generated by the Addison South TIF. As one activist puts it, "They give you a slice and keep the cake for themselves."

Some activists tell me they know all about the risks of TIFs from the last time they signed off on one. In 2000 the Logan Square Neighborhood Association reluctantly endorsed the Milwaukee-Fullerton TIF after the city promised to create an oversight committee and assured them that the money wouldn't be used to subsidize upscale development. But the city never created an oversight committee, and that TIF's first major expenditure was an $8.5 million subsidy to help a developer convert the old Florsheim factory near Belmont and Pulaski into upscale condos.

So why expose themselves to the same old disappointment? They say they have no choice--as bad as the system is, it's the only funding option they have.

For more on politics, see our blog Clout City at chicagoreader.com.

Art accompanying story in printed newspaper (not available in this archive): photo/Robert Murphy.

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